Jill M. Hutchison

The Mandatory Initial Discovery Pilot Project has started in the District of Arizona (for cases filed after May 1, 2017) and the Eastern Division of the Northern District of Illinois (for cases filed on or after June 1, 2017). See General Order 17-08 (D. Az. Apr. 14, 2017); General Order 17-005 (N.D. Ill. Apr. 27, 2017). The bottom line is that the pilot project will require defendants in these courts to quickly marshal the relevant facts and in short order produce a level of substantive disclosures, documents, and ESI that could pose a considerable challenge in consumer class actions and other complex cases. While these requirements set an ambitious goal for responsive pleadings and early disclosure of a broad swathe of information, there are proactive measures companies can take to be better prepared to respond to consumer class actions in the tight timeframe set by the pilot project.

Scope of the Pilot Project and Its Requirements

The two courts’ respective Standing Orders outline the details of the project, which will run for three years and applies to nearly all civil cases. See General Order 17-08 (D. Az.) and Standing Order Regarding Mandatory Initial Discovery Pilot Project (N.D. Ill.). The only civil cases exempted from the project are (1) actions under the Private Securities Litigation Reform Act, (2) patent cases governed by local rule, (3) cases transferred for consolidated administration by the Judicial Panel on Multidistrict Litigation, and (4) the assortment of cases listed in Rule 26(a)(1)(B) (i.e., review on administrative record, in rem forfeiture actions arising from federal statute, any proceeding challenging a criminal conviction or sentence, cases brought by someone in custody without the aid of an attorney, actions by the U.S. to recover benefit payments, actions by the U.S. to collect on government-guaranteed student loans, proceedings ancillary to cases in other courts, and actions to enforce arbitration awards). Parties are not allowed to opt out.

On January 30, President Trump signed the Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs. Executive Order 13371. The stated aim of the Order is to “manage the costs associated with the governmental imposition of private expenditures required to comply with Federal regulations” by identifying regulations for elimination. Order Section 1. Much of the early coverage of this Executive Order has focused on environmental regulations and labor rules, pondering the impact to workers, the environment, and public safety in exchange for a presumably less burdensome, lower-cost regulatory environment for businesses. However, a significant cut in the regulations of each agency is not a panacea that will result in a “gain” on the business side of the ledger for all industries. Fewer regulations, particularly regulations related to labeling, may make some aspects of the consumer products industry more complicated and costly, not less.

The International Agency for Research on Cancer (“IARC”), the specialized cancer agency of the World Health Organization, garnered attention in June 2016 when it deemed coffee “not classifiable” in terms of whether it increases human cancer risk. Though this new category may sound ambivalent, it was quite notable because IARC had previously classified coffee as “possibly carcinogenic.” When IARC classifies an agent as carcinogenic, probably carcinogenic, or even possibly carcinogenic, it often triggers a series of burdensome labeling obligations and gives rise to a wave of litigation for companies whose products contain the substance, even in trace amounts. Just what are IARC’s classifications, what are the significant obligations and litigation risks that classification by IARC as a (possible, probable) carcinogen may set in motion for consumer product companies, and what effect does a reversal by IARC have on those obligations and litigation risks?

In a recent New York Law Journal article, Partner Jeremy M. Creelan and Associate Daniel H. Wolf explore class action cases before the US Supreme Court. They explain that the Court in recent years has raised the thresholds for class action plaintiffs and other plaintiffs to bring and sustain their claims. “At the start of this Supreme Court term, the court appeared poised to continue this threshold-raising trend,” the authors observe. They examine Campbell-Ewald Co. v. Gomez and Microsoft Corp v. Baker. Associate Jacob D. Alderdice assisted with preparing the article.

The Supreme Court recently declined to wade into a developing circuit split on the question of just what constitutes an ascertainable class under Fed. R. Civ. P. 23(b)(3) class. In the case of many consumer products, particularly those that are consumable, like food, cosmetics, and supplements, the defendant is unlikely to have records to document individual customers’ purchases, and the consumers are unlikely to have kept receipts. In such cases, some court have permitted class members to self-identify by affidavit and have held that this identification method is acceptable to create an ascertainable class.

The Northern District of California is the latest court to rule that a consumer product company does not have an obligation to affirmatively disclose information on packaging about supply chain labor practices. Plaintiffs in Hodsdon v. Mars, Inc. claimed that Mars had an obligation to state on the label that chocolate products like M&Ms, Snickers, and Milky Way may contain cocoa beans picked by child or forced labor, and that the omission of that information from the packaging violated California’s False Advertising Law (“FAL”), Unfair Competition Law (“UCL”), and Consumers Legal Remedies Act (“CLRA”). Plaintiffs argued that consumers were willing to pay more for ethically sourced chocolate and would not have purchased or paid as much for the chocolates had the labels included information about the suppliers’ labor practices. The court held that Mars had no duty to disclose this supply chain information and granted Mars’ motion to dismiss without leave to amend because amendment would be futile. In doing so, the court questioned whether the safe harbor doctrine might also bar the claims, but did not resolve the issue.